Freddie Mac Q&A

Freddie Mac Q&A

     There are some distinct differences between a traditional home purchase and that of a Freddie Mac, HomeSteps Home. Below you will find the most commonly asked questions home buyers like yourself will need to know and understand before you begin the home search.

Freddie Mac, HomeSteps Home Buying Process:

Can I do a home inspection on a Freddie Mac home I am considering purchasing?

Yes. In most Freddie Mac transactions, the buyer is allowed to conduct all customary inspections within a specific inspection contingency timeline.

In traditional purchases, the contract allows for a 10day home inspection. In most cases, this rule will apply with Freddie Mac homes, unless something else is agreed to during the negotiations. Just like a traditional sale the 10day inspection period begins when the seller (Freddie Mac) signs the contract. Although this is usually the normal procedure for Freddie Mac properties, you still want to read the fine print to verify before you assume you have 10 days to conduct your inspections.

What does “AS-IS” mean?

All bank owned homes come with an “AS-IS” disclosure. Because the home has never been occupied by the current owner, in this case Freddie Mac, they can not provide you with the customary disclosures you would receive if you purchased a home from Mr. and Mrs. Smith. The banks take a position of “AS-IS” as a matter of liability. The “AS-IS” disclosure is put in place so you, as the buyer, understand you will be purchasing the home, in most cases, without any repairs being done by the seller. Nor will there be any disclosures about the property condition made by the current seller (Freddie Mac).

If during your home inspection you find the condition of the home is not acceptable to you, then you may exercise your right to cancel the contract and your earnest money will be returned 100%.

What if my FHA/VA appraisal requires repairs?

If your appraiser finds repairs that must be done as a condition for your loan to be approved, then you will need to contact the listing agent right away. Freddie Mac will require a copy of the appraisal and it will depend on the type of repairs and the cost to complete the repairs before Freddie Mac will agree to do any work to the house.

You are better off not writing an offer on a house that will require major FHA/VA appraisal repairs. If there are minor repairs Freddie Mac may be more inclined to agree, however, keep in mind, this case-by-case and could vary from property to property.

What is the First-Look Program?

Freddie Mac requires that all properties be on the market a minimum of 15 days before they will consider any offers from non-owner occupant purchasers. A non-owner occupant by definition is a purchaser who does not plan to occupy the property as their full time, primary residence. This includes second home buyers, any trust purchases, special entities who will hold title and all investors. If you are an owner occupant, there is no restriction on when you can make offer.

I have heard I have to sign special Bank Addendums?

Yes, all Freddie Mac properties will require you, as the buyer, to sign their purchase addendums. This document does not replace the Arizona Department of Real Estate purchase agreement, however, it can alter or change the terms of your original offer.

When your offer is accepted and terms have been agreed to, Freddie Mac will send you (or your real estate consultant) the bank addendums to sign. This document will reflect all the terms you have agreed to. Make sure you read this document and proof for any inaccuracies or spelling mistakes. If you are asking for any special concessions or closing costs, please make sure you read section 31 of the Freddie Mac addendum thoroughly. If you find there are mistakes, then you need to address them with the listing agent right away. Any changes must be made now, not during the escrow period.

How long do I have to review and sign the bank addendums?

In most cases, the sooner you sign and return the bank addendums to the listing agent, the better. The listing agent should give you a deadline in their instructions; however, a good rule of thumb is no later than 24 hours. If you are unable to meet the deadline for some reason, make sure you tell the listing agent. Otherwise, Freddie Mac has the right to cancel the offer and move onto the next buyer.

Why do I have to sign an Owner Occupant Certification?

Freddie Mac has implemented a form called an Owner Occupant Certification to ensure proper handling of purchases by non-owner occupants. This form is to help prevent fraudulent transactions where a buyer may say they plan to occupy the property but really have no intention of living there as their primary residence. The Owner Occupant Certification “certifies” that as consistent with your initial offer, you are in fact a true owner-occupant.

What is a per-diem?

A per-diem is a $50.00 daily fine that Freddie Mac may charge if the closing date should be delayed for any reason past the agreed upon date. Freddie Mac normally grants a 30 day closing for cash offers, 60 days for all financing offers and up to 90 days for FHA 203K type rehab loans.

If you require an extension during the escrow process, make sure you ask for it before your scheduled closing date. Freddie Mac understands that things happen during the process which can cause a delay. However, repeated extension requests can cause an issue and the asset manager will elect to charge you the per-diem if they wish. Talk to your loan officer prior to agreeing to a closing date in writing to make sure they can get the loan paperwork completed in the time allowed.

How long does it take to get a response from Freddie Mac?

If you (or your real estate consultant) have submitted an offer with all the proper documentation as required by the listing agent, most offers will be responded to within 48 hours. If you (or your real estate consultant) fail to follow the instructions given by the listing agent, this could prevent your offer from being submitted to Freddie Mac in a timely manner.

There are specific details the listing agent must know about you as the buyer before they can submit your offer. You need to be prepared to answer the following questions when submitting an offer on a Freddie Mac home:

1.)    Are you a first time home buyer?
2.)    Are you a Freddie Mac or HomeSteps® employee?
3.)    Are you a Freddie Mac or HomeSteps® supplier or relative?
4.)    Are you the previous lender or relative of the previous owner?
5.)    If you are purchasing as an investment, and title will not be held in your name, you must provide the name of the authorized signer.

Freddie Mac will never counter your offer in writing. This is vastly different than a traditional purchase. The listing agent will most likely email you (or your real estate consultant), which will be the next best thing to “in writing”.

What happens if there are multiple offers?

If there are multiple offers on the property, you will be asked to provide your “highest and best” offer. If multiple offers are received, it could take several days before you hear a response back. If you do not get your offer accepted, you may have the option to remain in a “back up” position. If anything should happen to the accepted offer, your offer could move into first position. Your real estate consultant can guide you through this process.

It is important to know that when Freddie Mac counters an offer in their online system (also known as a portal) they will not look at any other offers until that buyer has had a fair chance to review the terms of the counter and make a decision. If the buyer counters the counter or rejects, then Freddie Mac will open the negotiations back up to all interested parties.

What if I decide I want to add or remove someone from the contract paperwork?

Freddie Mac may allow you to make changes to the purchase if the changes are as follows: If you want to remove a name from the contract paperwork, you must submit a request in writing to the listing agent with an explanation for the change. Freddie Mac must approve the change first before an amendment to the sales contract can be prepared.

You can not add a buyer to the loan or contract at any point during the escrow process. Once the offer is accepted and paperwork has been signed, a change like this will require the contract to be canceled and resubmitted for approval. You will also be required to submit a new Pre-Qualification form with all qualifying parties.

How much Earnest Money do I need? Will they take a personal check?

Customary earnest money deposits are 1% of the purchase price. If you are making an offer on a home listed for less than $100,000, you should be prepared to make a deposit of at least $1,000. In some cases, Freddie Mac may counter your offer with a specific dollar amount they want as earnest money. All earnest money deposits must be in one of the following forms: money order, cashier’s check or wired directly to the title company.

Initially, when you make an offer, you may use a personal check to submit with your required paperwork, unless the listing agent has requested something different. Once your offer is accepted you will need to be prepared to get a money order or cashier’s check payable to the correct title company. If you plan to wire the earnest money deposit, you will need to get the wiring instructions from the title company to make sure your earnest money is applied to the correct escrow. Earnest money must be deposited right away, unless otherwise instructed by the listing agent.

I haven’t decided who I want to use for my loan, can I still make an offer on Freddie Mac property?

Although shopping around for a home loan is always a good idea, you will want to have your loan approval in hand before making an offer on a Freddie Mac home. Depending on the asset manager, they may not even consider your offer without a Pre-Qualification Form. Your loan officer can provide this document to you or your real estate consultant.

What if I have cash?

If you are planning to pay cash for the property, you will need to provide a copy of your bank statement or an official document which supports the offer you are making in available funds. The “proof of funds” must be in your name (or the name of the person/company on the contract) and it must be dated within the last 30 days. In some cases, an exception can be made if you are pulling money from an investment or account that only provides statements once a quarter. Talk to your real estate consultant about this for more information.

Can I choose my own title company?

The short answer is yes, however there are details you need to be aware of so you can fully understand the process. All Freddie Mac listings have been assigned to a specific title company at the time the foreclosure happens. This is to help discover any title issues prior to the home being offered for sale. Sometimes these title companies can be located in another state.

Freddie Mac agrees to pay for the customary “seller” closing costs, which includes an Owner’s Title Policy.

In most cases, if you choose to use a different title company, Freddie Mac will not pay for the seller side closing costs, nor will they provide an Owner’s Title Policy. Although you may have your reasons for using your own title company, and certainly that is your right according the RESPA guidelines, we highly recommend you stick with who Freddie Mac has selected.  A lot of issues can arise during the escrow process and the last thing you want to do is add more stress by working with a title company who is not familiar with the Freddie Mac process.

Will the seller provide a home warranty?

Currently Freddie Mac is offering a 2year home warranty on all owner-occupant purchases. If you are not planning to occupy the home as your primary residence, Freddie Mac will not provide any type of home warranty. You can visit HomeSteps.com to read the terms of the home warranty plan.

What if I want the seller to pay my closing costs?

Before you decide to ask the seller for a concession for closing costs, make sure you ask your loan officer how that will impact your loan. Most FHA/VA guidelines have a cap on how much you are allowed to receive as a concession. At this time, Freddie Mac will not contribute more than 3% of the purchase price towards any buyer side closing costs. From time to time, Freddie Mac will offer a special sales incentive where they may offer more than 3%. You can visit HomeSteps.com to learn what the current sales incentives are. There are two things to keep in mind when asking for seller concessions:

1.)    Freddie Mac will not pay for any closing cost concessions if you are an owner-occupant paying cash for the home. There is rarely an exception to this rule.
2.)    If you are investor or 2nd home buyer paying cash or financing, Freddie Mac will not pay for any closing cost concessions period. There are no exceptions to this rule.
3.)    Homeowner Association transfer and disclosure fees are a part of what the seller (Freddie Mac) considers buyer side closing costs. If you are asking for 3% concession, you need to calculate the cost of the HOA transfer and disclosure fees into this figure. In rare circumstances, there may be an exception to this rule, depending on the HOA and the specific property you are purchasing.

The property I am looking at has a homeowners association. How does that work with an REO home?

Some REO companies do not recognize the HOA Condominium/Planned Community Addendum that is used in traditional sales to disclose the HOA information. Freddie Mac will sign the Addendum if there is an HOA in the subdivision where the home is located, however they will not pay of any costs related to the HOA. If there is an upfront fee during the escrow process, the buyer will be required to pay this expense.

When a property is foreclosed on, Freddie Mac assumes the monthly, quarterly or annual cost of the HOA expenses from the date they recover the property. If there are any outstanding assessments, Freddie Mac, may or may not pay those fees. Most HOA Companies will try to collect as much as possible of the previous debt owed on the property. Freddie Mac, will at their discretion, decide how much of these fees they will pay. Special assessments for community or property improvements may be prorated and assumed by the new buyer.

If there is a large amount of back HOA dues accrued from a special assessment, you may want to ask the listing agent how those fees will be handled at the time of closing. Condo and townhouse projects tend to be more of an issue than single family homes. Again, it is important to remember that the HOA Company will try to collect as much as possible. This does not mean they are entitled to collect this debt. Make sure you ask your real estate consultant for more information if you are considering purchasing a home with an HOA.

Contact Information

Photo of Nate Martinez Real Estate
Nate Martinez
RE/MAX Professionals
20241 North 67th Avenue, Suite A1
Glendale AZ 85308
623-643-1010
602-430-5226
Fax: 602-532-7352

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